The price of samarium in North America has reached 346 times its price in China. This price change is only a preview of the costs that American industries will incur if exports from China stop. Jet engines, industrial motors, electric vehicles, wind turbines, and medical scanners all depend on rare magnets, and most American manufacturers still purchase their magnets at Chinese prices.
Supply and Production Challenges
Outside of China, the cost of dysprosium is five times and the cost of yttrium is over 100 times the Chinese prices. Japan has now realized what problems may arise if supply from China decreases and has requested assistance from the U.S. government to prevent a yttrium shortage by the end of the year.
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REalloys (NASDAQ: ALOY) is planning to capitalize on one of the most serious shortages developing in the rare metals supply chain in the U.S. This shortage alone will not be resolved with billions of dollars in new investments in mining and magnet production. The U.S. government has also intervened to protect domestic production from price competition from China. In a 10-year agreement with MP Materials, the Pentagon has guaranteed a minimum price of $110 per kilogram for NdPr and will cover the difference if prices fall below this level.
Production Capacity Development
This agreement protects MP Materials against price drops that have historically threatened Western rare metal producers. Meanwhile, investment in new mines and magnet production facilities is increasing, raising the question of who will supply the rare metals and alloys needed to connect these two sectors. REalloys has focused on this part of the supply chain.
For magnet producers, rare oxides must first be reduced to metal, then melted with other materials and cast into alloy bars that feed the magnet production line. According to a report by Canaccord Genuity, China controls over 90 percent of the 210,000 tons of global capacity at this stage, and analysts at the firm consider metallization to be a "major blind spot in the development of the Western supply chain."
Casting bar factories now take up to two years to be delivered, and Canadian studies have shown that purchasing them from China under current export controls is "impossible." Canaccord predicts that the capacity of magnet factories outside China will triple to over 70,000 tons by 2030. However, the capacity for non-Chinese metal and alloy during this period will only reach 38,000 tons, which will be about half of what new magnet factories will need.
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